House price optimism is at its highest for seven quarters

House
price optimism is at its highest for seven quarters,
Rightmove’s latest quarterly Consumer Confidence Survey of
over 40,000 home-movers finds.

More than a third of respondents (35%) expect house prices to be
higher one year from now, the highest level since the third quarter
of 2010.

The survey also finds that the proportion of those expecting house
prices to be lower in 12 months’ time is also at its lowest
level (20%) for seven quarters.

Miles Shipside, director at Rightmove, comments: “While the
most common view remains that property prices will be about the
same one year from now, this is the most upbeat price forecast
Britain’s homemovers have delivered in nearly two years.
Confidence plays an important role in motivating those who can
afford to buy to actually go ahead and transact. By self-selection,
many of them are hunting in the same better-heeled locations which
in turn builds greater momentum and price rise expectation in these
more affluent areas. Conversely, lower levels of activity in less
well-off areas spreads negative sentiment fuelling falling price
confidence.”

Respondents were asked to explain the main reason for their price
predictions and, interestingly, mortgage-related issues feature
prominently in both the price optimist and price pessimist camps.
Among price-optimists, 35% report an improving mortgage market and
a further 14% identify continued low interest rates as the main
reason for their view that prices will be higher 12 months from
now.

Mortgage-related concerns are even more prevalent amongst price
pessimists with nearly two-thirds (64%) collectively citing the
following reasons for their negative price outlook: little or no
improvement in mortgage availability (33%), high deposits required
by lenders (16%) and fear of interest rates rising (15%).

Shipside comments: “The mortgage market continues to occupy
home-movers’ thoughts and there is evidence here that house
price confidence is steered by their interpretation of mortgage
availability. How you read it, which probably depends on whether
you are ‘included’ or ‘excluded’ as
mortgage-worthy by the lenders, seems to determine what you think
will happen to prices. Those with larger deposits will naturally
have a more positive interpretation of access to finance and,
therefore, prices.”

Half of those intending to buy in the next 12 months state that
finding a suitable property to buy is their single biggest concern.
This has risen consistently from 36% two years ago and 44% a year
ago to 50% now. Rightmove has previously reported that fresh
property choice coming to market remains subdued at around 35%
below 2007 pre-credit-crunch levels. The most active buyer markets
tend to be those where the cash-rich wish to live, leading to
suitable property shortages and rising prices.

Shipside, observes: “Those looking to buy this year say their
biggest concern is finding a suitable property to buy. This is
leading a big chunk of those at the sharp-end of the property
market to forecast higher prices as the lack of suitable choice
will encourage them to pay a bit more to secure the right home when
they find it. Those who can proceed will often be competing in the
same locations as other deposit-rich buyers which could lead to
increased rivalry for the most appealing properties.”

One of the features of this downturn is that property prices have
held up or recovered better than many anticipated. This has not
aided a return to the levels of affordability seen in previous
downturns, which has been one of the factors in keeping sales
transaction volumes muted. Indeed, nearly half (46%) of those
surveyed state they felt property prices in their local area are
above fair and reasonable levels.

Shipside adds: “In spite nearly half of people stating they
think property prices are top heavy in their local area, the
overwhelming view is that property prices will be the same or
higher in a years’ time. Those that are active in the market
are perhaps looking in the better areas so their view is likely to
be influenced by more buoyant conditions in cash rich locations.
The less active deposit-poor areas will be those where prices will
have to be dropped if a seller is keen to sell.”

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